1.
China Medical Devices
China Medical Devices
Young Industry with Strong
Growth Prospects
Conclusion: We initiate coverage of the China Medical
Device industry with an Attractive view; OW ratings on
Mindray and China Medical Technologies, and EW
rating on Weigao. We believe the sector offers the best
investment opportunity within the China healthcare
space because of its superior and sustainable domestic
and international growth, thanks to increasing Chinese
government spending and the cost advantage vs. global
companies in Chinese and overseas markets.
We initiate coverage of the China Medical
Device industry with an Attractive view; OW ratings on
Mindray and China Medical Technologies, and EW
rating on Weigao. We believe the sector offers the best
investment opportunity within the China healthcare
space because of its superior and sustainable domestic
and international growth, thanks to increasing Chinese
government spending and the cost advantage vs. global
companies in Chinese and overseas markets.
Top picks in our coverage universe: MR and CMED
MR trades at 22.1x 2009E EPS vs.11.3x for CMED,
19.7x for Weigao and 19.5x for sector peers. MR’s
premium valuation is justified, in our view, by its leading
industry position, broad product portfolio, unmatched
distribution network, outstanding R&D, and aggressive
global expansion plan. CMED has the lowest valuation
among Chinese device companies but has become a
major player in the high-growth, high-margin in-vitro
diagnostic area. We like its razor-blade business model
with strong recurring revenue from reagent sales. For
Weigao, while we like its long-term outlook, we would
need more visibility on its pending transactions and stent
business before turning more positive on the stock.
2.
Shimao Property
Shimao Property
Biting the “Silver Bullet”
What's Changed
Price Target HK$30.00 to HK$14.81
HK$30.00 to HK$14.81
2008E EPS From RMB 1.22 to RMB1.04
From RMB 1.22 to RMB1.04
2009E EPS From RMB2.02 to RMB1.49
From RMB2.02 to RMB1.49
2010E EPS New RMB1.74
Maintain Overweight with a new PT of HK$14.81: We
derive our new price target of HK$14.81 based on a 40%
discount to our 12-month forward NAV estimate of
HK$24.68. We are maintaining our Overweight rating on
the shares.
New RMB1.74
Maintain Overweight with a new PT of HK$14.81: We
derive our new price target of HK$14.81 based on a 40%
discount to our 12-month forward NAV estimate of
HK$24.68. We are maintaining our Overweight rating on
the shares.
We
derive our new price target of HK$14.81 based on a 40%
discount to our 12-month forward NAV estimate of
HK$24.68. We are maintaining our Overweight rating on
the shares.
A tough task to meet 2008 sales target: Shimao has
made contract sales of Rmb4 billion so far this year,
representing 23% of its target for 2008 and 28% of our
revenue estimate. This is at the low end of its peer group.
Shimao will have to generate monthly sales of
Rmb2.5-3.0bn in the remaining six months to meet its
target, which is not an easy task for most companies.
Shimao has
made contract sales of Rmb4 billion so far this year,
representing 23% of its target for 2008 and 28% of our
revenue estimate. This is at the low end of its peer group.
Shimao will have to generate monthly sales of
Rmb2.5-3.0bn in the remaining six months to meet its
target, which is not an easy task for most companies.
It is time to draw the wild card: Shimao plans to
launch the Shimao Riviera Garden this year, contrary to
our belief that it would hold out until the property market
recovers. This move hints at the difficulty facing Shimao
in achieving its earlier contract sales target without
taking into account its “Silver Bullet” project.
3.
Shandong Weigao
Shandong Weigao
Solid LT Potential Hampered
by ST Concerns; Initiate at
Equal-weight
Conclusion: We initiate coverage of Shandong Weigao
Group Medical Polymer with an Equal-weight rating and
a price target of HK$13. We expect Weigao to trade in
line with the sector, as potential positives from
increasing healthcare spending triggered by healthcare
reform and strong economic growth in China are
moderated by concerns over potential share dilution
from the Biosensors deal and increasing risks for the
stent business.
Our PT equates to a P/E of 19.7x our 2009 EPS
estimate. This P/E ratio is in line with the average P/E of
19.5x for comparable medical device companies.
We initiate coverage of Shandong Weigao
Group Medical Polymer with an Equal-weight rating and
a price target of HK$13. We expect Weigao to trade in
line with the sector, as potential positives from
increasing healthcare spending triggered by healthcare
reform and strong economic growth in China are
moderated by concerns over potential share dilution
from the Biosensors deal and increasing risks for the
stent business.
Our PT equates to a P/E of 19.7x our 2009 EPS
estimate. This P/E ratio is in line with the average P/E of
19.5x for comparable medical device companies.
Shimao plans to
launch the Shimao Riviera Garden this year, contrary to
our belief that it would hold out until the property market
recovers. This move hints at the difficulty facing Shimao
in achieving its earlier contract sales target without
taking into account its “Silver Bullet” project.
3.
Shandong Weigao
Shandong Weigao
Solid LT Potential Hampered
by ST Concerns; Initiate at
Equal-weight
Conclusion: We initiate coverage of Shandong Weigao
Group Medical Polymer with an Equal-weight rating and
a price target of HK$13. We expect Weigao to trade in
line with the sector, as potential positives from
increasing healthcare spending triggered by healthcare
reform and strong economic growth in China are
moderated by concerns over potential share dilution
from the Biosensors deal and increasing risks for the
stent business.
Our PT equates to a P/E of 19.7x our 2009 EPS
estimate. This P/E ratio is in line with the average P/E of
19.5x for comparable medical device companies.
We initiate coverage of Shandong Weigao
Group Medical Polymer with an Equal-weight rating and
a price target of HK$13. We expect Weigao to trade in
line with the sector, as potential positives from
increasing healthcare spending triggered by healthcare
reform and strong economic growth in China are
moderated by concerns over potential share dilution
from the Biosensors deal and increasing risks for the
stent business.
Our PT equates to a P/E of 19.7x our 2009 EPS
estimate. This P/E ratio is in line with the average P/E of
19.5x for comparable medical device companies.
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